National Minimum Wage & Tax Credits

At some book launch or other, David Blunkett MP (Lab, Sheffield Brightside) "will argue that the statutory rate should rise steadily to 50% of average wage levels if the Government is to meet its target of halving child poverty by 2010".

Righty-ho. Let's assume that they go mad and increase the NMW from £5.52 to £6.86 (half average wage). The speech refers to 'child poverty', so let's look at a single mum (oops! 'lone parent' in Newspeak) with two kids working 35 hours a week. She currently has a gross income of £193.20, after paying tax and claiming the main benefits, her household's net after housing costs according to DWP TBMT Table 1.3e (page 53) is £223 a week. If they up the NMW to £6.86, her gross income increases to £240 and her net household income to a princely ... £227 per week.

Wot? An extra £4 a week? Yup, that's right, £4.

Conversely, we all know that demand for labour is pretty price elastic - if you force employers to pay more than a job is worth, they will go bankrupt, and so people on the current NMW will lose their jobs. So single mum outlined above may well become unemployed as a result of the change, as a result of which her net household income would fall to £175 (DWP TBMT Table 2.1a).

Which is hardly a storming result is it? Half of such single mums with a job might see their net income increase by £4, the other half will see their net income fall by £48, not to mention the overall loss to the economy, lack of role model for her kids etc etc.

Finally, let's not forget that David Blunkett miraculously secured a job with Entrust, a company bidding for the ID-card nonsense, see Garrick Elder's letter in The Times of 24 Nov 2007 exactly five minutes after his two-year lobbying ban expired.